The Administration Process of a Trust

Introduction

Now that the Family Trust has been registered and the Letters of Authority been issued by the Master of the High Court, you need to start the administration process of the trust.
The Trustees now have the authority to act on behalf of the trust: – Open a banking account – Register as a tax payer with SARS, etc

A Trust is, in most cases, a discretionary trust – Trustees have discretion to allocate trust income and capital to beneficiaries – Beneficiaries have a hope to benefit and no vested right (bewinds trust)
There a various reasons for setting up a trust:

Part of estate planning and structuring

Tax advantages

Provision / maintenance for dependants

Protection of assets over following generations

How to transfer assets in the trust:

Sale agreement

Donation

Loan account

First things firsts

Open a File

Documents are filed herein

LOA, Deed of Trust, Resolutions etc…

Copies

Only use certified copies of the above

Retain original LOA and resolutions

Minutes Book

At least 1 meeting of Trustees must be held annually

Minutes of all such meetings must be recorded in the Minutes Book

All decisions taken must be reduced to writing and recorded as Resolutions

Resolutions are the only documents with which the trust can communicate with the outside world.

Agenda for a Trustee meeting

Welcome

Attendance register

Confirming that a quorum is present as required by the Deed of Trust

For discussion:

Elect a Chairman and Secretary

Work process for the administration of the trust

Bank account

Signing power

What type of banking account

Internet banking

Which trustee will be in charge of the bank account

Accounting officer to:

register the trust as a tax payer

compile the financials

lodge tax returns

Bookkeeping

Allocation of funds

Anticipated projects for the year

Buying a fixed property

Investing

Loaning funds to beneficiaries

Etc.

Next meeting

Meeting

Arrange the meeting

Date, time, venue

Take minutes of the meeting

Conclude

Confirm address of trust

The accounting officer must confirm on his Letterhead

Present to banks, SARS, etc…

Trustees / Beneficiaries

FICA requirements

Open Banking Account

Required when money starts flowing in and out of trust

Must be in the name of the Trust

Banks require:

Resolution by trustees

LOA

Deed of Trust

ID’s and FICA of Trustees

FICA of beneficiaries (Any person named as beneficiary in the deed of trust!!)

Register as taxpayer with SARS

Required by law

Income retained is taxed at 40%

If turnover exceeds R1m, must be registered as VAT vendor

Accounting/ Bookkeeping

Must be kept on a monthly basis

Record all income and expenses

Draw up annual Income and Expense Account, as well as a Balance Sheet recording all assets and liabilities

Trust Properties Control Act does not require the financial statements to be audited

Entries can be done by way of journals and T-accounts

Bank Statements

All transactions must be recorded in the Income and Expense Account on a monthly basis

Serves as voucher for entries

The Recipe

Each project performed by the Trustees should follow a general recipe to ensure all requirements are met.

Per Project (Once Off)

A resolution by the Trustees tasking a specific Trustee to manage the project